The most recent balance sheet and income statement of Heldt Corporation appear
below:
The company paid a cash dividend and it did not dispose of any property, plant, and
equipment. The company did not purchase any bonds payable or repurchase any of its
own common stock. The following question pertain to the company’s statement of cash
flows.
The net cash provided by (used in) financing activities for the year was:
A. $(25)
B. $(30)
C. $3
D. $(8)
Answer:
In October, one of the processing departments at Schones Corporation had beginning
work in process inventory of $26,000 and ending work in process inventory of $17,000.
During the month, $279,000 of costs were added to production and the cost of units
transferred out from the department was $288,000. The company uses the FIFO method
in its process costing system. In the department’s cost reconciliation report for October,
the total cost to be accounted for would be:
A. $584,000
B. $43,000
C. $610,000
D. $305,000
Answer:
Cress Company makes four products in a single facility. Data concerning these products
appear below:
The milling machines are potentially the constraint in the production facility. A total of
11,500 minutes are available per month on these machines.
Up to how much should the company be willing to pay for one additional minute of
milling machine time if the company has made the best use of the existing milling
machine capacity? (Round off to the nearest whole cent.)
A. $7.46
B. $15.20
C. $19.40
D. $0.00
Answer:
Hartzog Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $60 thousand. Dividends on
preferred stock totaled $5 thousand. The market price of common stock at the end of
Year 2 was $7.04 per share.
The return on total assets for Year 2 is closest to:
A. 7.85%
B. 7.77%
C. 6.51%
D. 6.44%
Answer:
Financial leverage is negative when:
A. the return on total assets is less than the rate of return on common stockholders’
equity.
B. total liabilities are less than stockholders’ equity.
C. total liabilities are less than total assets.
D. the return on total assets is less than the rate of return demanded by creditors.
Answer:
Evergreen Corp. has provided the following data:
The margin of safety percentage is:
A. 45.0%
B. 71.4%
C. 55.0%
D. 25.0%
Answer:
Behring Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for
the most recent month appear below:
The company based its original budget on 3,200 machine-hours. The company actually
worked 3,170 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 3,250 machine-hours. What was the overall fixed
manufacturing overhead volume variance for the month?
A) $435 favorable
B) $261 unfavorable
C) $435 unfavorable
D) $261 favorable
Answer:
Aide Industries is a division of a major corporation. Data concerning the most recent
year appears below:
The division’s return on investment (ROI) is closest to:
A. 4.1%
B. 21.75%
C. 17.9%
D. 1.1%
Answer:
Fillip Corporation makes 4,000 units of part U13 each year. This part is used in one of
the company’s products. The company’s Accounting Department reports the following
costs of producing the part at this level of activity:
An outside supplier has offered to make and sell the part to the company for $21.60
each. If this offer is accepted, the supervisor’s salary and all of the variable costs,
including direct labor, can be avoided. The special equipment used to make the part was
purchased many years ago and has no salvage value or other use. The allocated general
overhead represents fixed costs of the entire company. If the outside supplier’s offer
were accepted, only $3,000 of these allocated general overhead costs would be avoided.
In addition, the space used to produce part U13 would be used to make more of one of
the company’s other products, generating an additional segment margin of $13,000 per
year for that product.
What would be the impact on the company’s overall net operating income of buying
part U13 from the outside supplier?
A. Net operating income would increase by $13,000 per year.
B. Net operating income would decline by $42,600 per year.
C. Net operating income would decline by $68,600 per year.
D. Net operating income would increase by $9,200 per year.
Answer:
Fayard Corporation uses the weighted-average method in its process costing system.
The Assembly Department started the month with 5,000 units in its beginning work in
process inventory that were 70% complete with respect to conversion costs. An
additional 67,000 units were transferred in from the prior department during the month
to begin processing in the Assembly Department. During the month 63,000 units were
completed in the Assembly Department and transferred to the next processing
department. There were 9,000 units in the ending work in process inventory of the
Assembly Department that were 50% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the
month?
A. 71,000
B. 64,000
C. 63,000
D. 67,500
Answer:
Hayne Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. Data for the most recently completed year appear
below:
The predetermined overhead rate for the recently completed year was closest to:
A. $7.89
B. $30.95
C. $24.52
D. $32.41
Answer:
Reference: 8-9
Parisi Clinic uses client-visits as its measure of activity. During March, the clinic
budgeted for 2,300 client-visits, but its actual level of activity was 2,350 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting:
The medical supplies in the flexible budget for March would be closest to:
A) $19,149
B) $19,395
C) $19,990
D) $19,010
Answer:
Reference: 8A-8
The Hawkins Company uses a standard costing system in which manufacturing
overhead is applied on the basis of standard direct labor-hours (DLHs). During
February, the company actually used 9,200 direct labor-hours and made 2,900 units of
finished product. The standard cost card for one unit of product includes the following:
Variable factory overhead: 3 DLHs @ $4.75 per DLH
Fixed factory overhead: 3 DLHs @ $3.00 per DLH
For February, the company incurred $28,450 in fixed manufacturing overhead costs and
recorded a $900 favorable volume variance.
The amount of fixed manufacturing overhead cost contained in the companys budget
for February is:
A) $27,000
B) $27,550
C) $25,200
D) $29,350
Answer:
Dickonson Products is a division of a major corporation. The following data are for the
last year of operations:
The division’s turnover is closest to:
A. 3.78
B. 41.67
C. 4.16
D. 0.10
Answer:
The following cost formula relates to last year’s operations at Lemine Manufacturing
Corporation:
Y = $84,000 + $60.00X
In the formula above, 75% of the fixed cost and 90% of the variable cost are
manufacturing costs. Y is the total cost and X is the number of units produced and sold.
If Lemine produces and sells only 6,000 units, what is the unit product cost under each
of the following methods?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
The activity in Nolan Company’s Blending Department for the month of April is given
below:
All materials are added at the beginning of processing in the Blending Department.
The equivalent units for material for the month, using the weighted-average method,
are:
A. 48,000 units
B. 50,000 units
C. 58,000 units
D. 52,000 units
Answer:
Wright Corporation’s contribution format income statement for last month appears
below.
There were no beginning or ending inventories. The company produced and sold 3,000
units during the month.
If sales decrease by 500 units by next month, by how much would fixed expenses have
to be reduced to maintain the current net operating income?
A. $7,500
B. $6,000
C. $2,000
D. $3,000
Answer:
Compound Q11H is a raw material used to make Grater Corporation’s major product.
The standard cost of compound Q11H is $23.00 per ounce and the standard quantity is
3.8 ounces per unit of output. Data concerning the compound for October appear below:
The raw material was purchased on account.
The debits to the Raw Materials account for October would total:
A. $52,900
B. $52,440
C. $48,760
D. $53,130
Answer:
Reference: 8-18
Brothern Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During May, the company budgeted
for 6,800 units, but its actual level of activity was 6,820 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for May:
Data used in budgeting:
Actual results for May:
The selling and administrative expenses in the planning budget for May would be
closest to:
A) $30,956
B) $30,940
C) $32,286
D) $32,191
Answer:
(Ignore income taxes in this problem.) Virani Corporation has entered into a 8 year
lease for a piece of equipment. The annual payment under the lease will be $2,000, with
payments being made at the beginning of each year. If the discount rate is 9%, the
present value of the lease payments is closest to:
A. $8,030
B. $12,066
C. $16,000
D. $14,679
Answer:
The Rodgers Company makes 27,000 units of a certain component each year for use in
one of its products. The cost per unit for the component at this level of activity is as
follows:
Rodgers has received an offer from an outside supplier who is willing to provide 27,000
units of this component each year at a price of $25 per component. Assume that direct
labor is a variable cost. None of the fixed manufacturing overhead would be avoidable
if this component were purchased from the outside supplier.
Assume that if the component is purchased from the outside supplier, $35,100 of annual
fixed manufacturing overhead would be avoided and the facilities now being used to
make the component would be rented to another company for $64,800 per year. If
Rodgers chooses to buy the component from the outside supplier under these
circumstances, then the impact on annual net operating income due to accepting the
offer would be:
A. $18,900 decrease
B. $18,900 increase
C. $21,400 decrease
D. $21,400 increase
Answer:
Which of the following statements is not correct?
A. The sales budget is the starting point in preparing the master budget.
B. The sales budget is constructed by multiplying the expected sales in units by the
sales price.
C. The sales budget generally is accompanied by a computation of expected cash
receipts for the forthcoming budget period.
D. The cash budget must be prepared prior to the sales budget because managers want
to know the expected cash collections on sales made to customers in prior periods
before projecting sales for the current period.
Answer:
Malcolm Company uses a predetermined overhead rate based on direct labor-hours to
apply manufacturing overhead to jobs.
The cost records for September will show:
A. Overapplied manufacturing overhead of $1,500
B. Underapplied overhead of $1,500
C. Overapplied manufacturing overhead of $3,500
D. Underapplied overhead of $3,500
Answer:
Last year, Flynn Company reported a profit of $70,000 when sales totaled $520,000 and
the contribution margin ratio was 40%. If fixed expenses increase by $10,000 next year,
what amount of sales will be necessary in order for the company to earn a profit of
$80,000?
A. $600,000
B. $570,000
C. $562,500
D. $625,000
Answer:
Reference: 8-3
Macphail Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During April, the company budgeted
for 5,600 units, but its actual level of activity was 5,650 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for April:
Data used in budgeting:
Actual results for April:
The revenue variance for April would be closest to:
A) $1,645 F
B) $1,645 U
C) $3,840 U
D) $3,840 F
Answer:
A partial listing of costs incurred during December at Gagnier Corporation appears
below:
The total of the product costs listed above for December is:
A. $310,000
B. $89,000
C. $635,000
D. $325,000
Answer:
The Donaldson Company uses a job-order costing system. The following data were
recorded for July:
Overhead is applied to jobs at the rate of 80% of direct materials cost. Jobs 475, 477,
and 478 were completed during July and transferred to finished goods. Jobs 475 and
478 have been delivered to the customer. Donaldson’s Work in Process inventory
balance on July 31 was:
A. $7,280
B. $2,600
C. $3,160
D. $3,320
Answer:
Condensed monthly operating income data for Cosmo Inc. for November is presented
below. Additional information regarding Cosmo’s operations follows the statement.
Three-quarters of each store’s traceable fixed expenses are avoidable if the store were to
be closed.
Cosmo allocates common fixed expenses to each store on the basis of sales dollars.
Management estimates that closing the Town Store would result in a ten percent
decrease in Mall Store sales, while closing the Mall Store would not affect Town Store
sales.
The operating results for November are representative of all months.
Cosmo is considering a promotional campaign at the Town Store that would not affect
the Mall Store. Increasing annual promotional expenses at the Town Store by $60,000
in order to increase Town Store sales by ten percent would result in a monthly increase
(decrease) in Cosmo’s operating income of:
A. $(16,800)
B. $3,400
C. $7,000
D. $(1,400)
Answer:
Entin Corporation reported the following data for the month of January:
The direct materials cost for January is:
A. $59,000
B. $56,000
C. $71,000
D. $65,000
Answer:
Reference: 8A-18
The following data for April has been provided by Mittler Corporation.
The budget variance for April is:
A) $5,660 U
B) $8,120 F
C) $8,120 U
D) $5,660 F
Answer:
Reference: 8-35
Sande Corporation makes a product with the following standard costs:
In November the companys budgeted production was 2,900 units but the actual
production was 3,000 units. The company used 27,670 grams of the direct material and
1,390 direct labor-hours to produce this output. During the month, the company
purchased 31,700 grams of the direct material at a cost of $196,540. The actual direct
labor cost was $29,607 and the actual variable overhead cost was $2,502.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The labor rate variance for November is:
A) $2,363 U
B) $2,550 F
C) $2,550 U
D) $2,363 F
Answer:
Trecroci Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The company bases its predetermined overhead rate on 2,500
machine-hours. The companys total budgeted fixed manufacturing overhead is $5,750.
In the most recent month, the total actual fixed manufacturing overhead was $6,030.
The company actually worked 2,600 machine-hours during the month. The standard
hours allowed for the actual output of the month totaled 2,490 machine-hours. What
was the overall fixed manufacturing overhead volume variance for the month?
A) $230 favorable
B) $280 unfavorable
C) $23 unfavorable
D) $230 unfavorable
Answer:
Reference: 8-12
Nakhle Kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. During October, the kennel budgeted
for 3,000 tenant-days, but its actual level of activity was 2,960 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for October:
Data used in budgeting:
Actual results for October:
The administrative expenses in the planning budget for October would be closest to:
A) $7,484
B) $7,284
C) $7,585
D) $7,300
Answer: